It would definitely have to be a hardware mod. Two reasons why software wouldn't work:

1. You can't run two programs at once on the DS. Thus, you can't run both the screenshop capture app and a game at the same time.
2. Though the DS does have an internal screenshot function, it only works on the primary screen (which is up to each developer to choose).

Thus, it would have to be some sort of hardware modification that captured the video signal and rerouted it elsewhere.

Off-topic: UltraMagnus, I always wanted one of those for my GBA, never got around to getting one. Of course, I also wanted the Afterburner kit, the GBAccelerator, and the SNES controller linkup cable thing, and never got those either, heh.